03.08.2016

Coates cuts losses

The joint owner of Australia’s Coates Hire – the Seven Group – has published its annual report for the year to the end of June.

The report only provides the most basic information on each of Seven’s operating divisions which include Cat dealer Westrac.

Revenues at Coates Hire fell five percent to $873 million, although the company says that the second half was better, with revenues down just one percent on last year. Profit before interest and tax dropped seven percent to $97.3 million, as the company closed 14 branches and laid off over 200 staff. The business did manage to cut last years net profit after tax from $435.9 million to a loss of $17.8 million this year.

The company says that following the acquisition of the Force Equipment fleet during the year, its aerial lift fleet now exceeds 10,000 units. It adds that its recent strategy of chasing market share aggressively will continue, but then adds that it is increasing pricing discipline among its sales force. It also adds that it has successfully shifted over $50 million worth of equipment from the slower markets in West Australia to the more buoyant Eastern seaboard and disposed of $283 million worth of equipment (at original purchase cost).

Other measures involve cutting at least $8 million of costs, partly by improving procurement procedures, which will include a substantial reduction in the number of suppliers and greater buying discipline. The business has also reduced its debt by $75 million during the year, with lenders recently looking to shed Coates debt at a discount opportunities exist to reduce this further.

Vertikal Comment

Coates is easily the market leader in Australia, but has been struggling under its debt burden, as well as the uncertainties caused by the fact that both Seven and its other major shareholder Carlyle, both indicated that they would like to dispose of their investment and yet have been unable to find a suitable buyer. This can of course be highly destabilising as uncertainty and a challenging market can be a toxic combination.